Analyzing Alliance Data Systems (NYSE:ADS) & CoStar Group (NYSE:CSGP)

Alliance Data Systems (NYSE:ADS) and CoStar Group (NASDAQ:CSGP) are both business services companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, earnings, risk, dividends, institutional ownership and profitability.

Volatility and Risk

Alliance Data Systems has a beta of 1.63, meaning that its stock price is 63% more volatile than the S&P 500. Comparatively, CoStar Group has a beta of 1.32, meaning that its stock price is 32% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings for Alliance Data Systems and CoStar Group, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Alliance Data Systems 1 6 8 0 2.47
CoStar Group 1 0 8 0 2.78

Alliance Data Systems presently has a consensus price target of $211.67, suggesting a potential upside of 39.66%. CoStar Group has a consensus price target of $621.56, suggesting a potential upside of 3.72%. Given Alliance Data Systems’ higher probable upside, analysts clearly believe Alliance Data Systems is more favorable than CoStar Group.

Valuation & Earnings

This table compares Alliance Data Systems and CoStar Group’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Alliance Data Systems $7.79 billion 1.02 $963.10 million $21.56 7.03
CoStar Group $1.19 billion 18.38 $238.33 million $7.40 80.98

Alliance Data Systems has higher revenue and earnings than CoStar Group. Alliance Data Systems is trading at a lower price-to-earnings ratio than CoStar Group, indicating that it is currently the more affordable of the two stocks.

Dividends

Alliance Data Systems pays an annual dividend of $2.52 per share and has a dividend yield of 1.7%. CoStar Group does not pay a dividend. Alliance Data Systems pays out 11.7% of its earnings in the form of a dividend. Alliance Data Systems has increased its dividend for 2 consecutive years.

Institutional and Insider Ownership

92.2% of Alliance Data Systems shares are held by institutional investors. Comparatively, 96.2% of CoStar Group shares are held by institutional investors. 2.8% of Alliance Data Systems shares are held by company insiders. Comparatively, 2.1% of CoStar Group shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Alliance Data Systems and CoStar Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Alliance Data Systems 13.01% 46.72% 3.59%
CoStar Group 22.48% 10.42% 9.35%

Summary

Alliance Data Systems beats CoStar Group on 9 of the 16 factors compared between the two stocks.

Alliance Data Systems Company Profile

Alliance Data Systems Corporation provides data-driven marketing and loyalty solutions worldwide. It operates through three segments: LoyaltyOne, Epsilon, and Card Services. The company offers a portfolio of integrated outsourced marketing solutions, including customer loyalty programs, database marketing services, end-to-end marketing services, analytics and creative services, direct marketing services, and private label and co-brand retail credit card programs. It also focuses on facilitating and managing interactions between its clients and their customers through various consumer marketing channels, including in-store, online, email, social media, mobile, direct mail, and telephone. The company captures and analyzes data created during each customer interaction, leveraging the insight derived from that data to enable clients to identify and acquire new customers and to enhance customer loyalty. It serves clients across various end-markets, including financial services, specialty retail, grocery and drugstore chains, petroleum retail, automotive, hospitality and travel, telecommunications, insurance, and healthcare. Alliance Data Systems Corporation was founded in 1996 and is headquartered in Plano, Texas.

CoStar Group Company Profile

CoStar Group, Inc. provides information, analytics, and online marketplaces to the commercial real estate industry in the United States and the United Kingdom. The company offers CoStar Property Professional service that offers inventory of office, industrial, retail, and multifamily properties and land. It also provides CoStar COMPS Professional that covers comparable commercial real estate sales information; CoStar Tenant, an online business-to-business prospecting and analytical tool; CoStar Lease Comps, a solution to capture, manage, and maintain lease data; CoStar Lease Analysis, a workflow tool; CoStar Advertising to market a space for lease or a property for sale; CoStar Private Sale Network, which provides custom-designed and branded Websites; and CoStar and CoStar Go CoStar mobile apps. In addition, the company offers CoStar Real Estate Manager, a real estate and asset management, and lease accounting software; CoStar Risk Analytics, a commercial real estate risk management tool; CoStar Brokerage Applications; CoStar Investment Analysis Request, a business intelligence software; and CoStar Investment Analysis Portfolio Maximizer, a real estate portfolio management software. Further, it provides apartment marketing sites, such as Apartments.com, ApartmentFinder.com, ForRent.com, ApartmentHomeLiving.com, Apartamentos.com, WestsideRentals.com, and Cozy.co; LoopNet Premium Lister and LoopNet Power Listings for commercial real estate professionals; LoopLink, an online real estate marketing and database services suite; Listing Manager, an online listing tool; Realla, a commercial property listings and data management platform; LandsofAmerica, LandAndFarm, and LandWatch online marketplaces for rural land for sale; and BizBuySell and BizQuest online marketplaces for operating businesses for sale. The company has a strategic relationship with Buxton Company. The company was founded in 1987 and is headquartered in Washington, the District of Columbia.

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